Pretty well! Via a research note, Citi analyst Mark Mahaney now thinks Amazon sold 500,000 Kindles last year, more than his previous estimate of 380,000. (And if Amazon hadn't run out of Kindles in November, it could have potentially sold 750,000, Mahaney estimates.)

Mahaney now thinks Amazon's all-in Kindle revenue could reach $1.4 billion in 2010, or an impressive 4% of Amazon's revenue that year. This assumes that Amazon will sell 1 million Kindles in 2009 and 3.5 million in 2010; that Kindle owners buy one book per month, etc. It's an admittedly rough estimate, but not necessarily an unbelievable one.

Just as important: Mahaney thinks Amazon could get relatively similar profits for each e-book sold that it currently gets for physical books.

How's he get to half a million Kindles sold in 2008? A disclosure in Sprint Nextel's (S) SEC filings, discovered by colleague Mike Rollins, that refers to some wholesale partners activating devices on Sprint's network before they're sold. And some other factors, such as the fact that the Kindle is still at the top of Amazon's best-selling list, and that positive reviews keep rolling in.

There's still a lot of factors that could affect Kindle adoption -- competing devices and services from companies like Apple (AAPL), e-book pricing, Amazon potentially offering Kindle software for other devices, etc. But the idea that the Kindle could potentially become a significant part of Amazon's business in the next two years isn't too far-fetched.